As I think I've shared with ya'll, before, I've read most of Bill Bonner's ouevre by now and am convinced the man is a Catholic. However, he's never directly acknowledged the fact, never used the words "Catholic" or "Christian," and never mentioned the name of Jesus, although his indirect references to God and the Catholic faith fly thick and fast in his writing. So I've been keeping an eye on this guy for more direct references--a soulwatch, if you will.
Because I want to believe Bill Bonner's soul is saved.
Maybe it's because he's the same age as my dad. Maybe it's because he's a good writer. Maybe it's because, in his world-weary pose as a cynical, contrarian, "metrosexual" ex-pat living mostly in France, he reminds me of a modern-day Erasmus--in secular drag. And yet...I haven't been able to really believe he was a Catholic who lived his faith...until today:
"The more man gets; the more he wants. If he can communicate via Internet…or via airplane…he'll do both. The Internet Revolution was supposed to reduce the demand for fossil fuel. Finally, man had conquered distance. You no longer needed to commute to the office…or half way around the globe. You could have your meeting, and do your work, without ever leaving home.
But what has happened? Now people work from the home…and the office! And still they travel. They want it all - bigger houses, more stuff, more vacations…and they want to work harder too.
"Work…work…work…consume…consume…consume…
"But something went wrong with this model in America. In the last quarter of the last century, people worked harder than ever. What did it get them? Nothing. Nobody realized it, but they had reached an era of declining marginal utility of work."
This is just a sample from one of his columns--which he churns out daily--and proves why I just love this guy. No dry analysis here...every statistic comes with a story. Every financial crisis has a face. In fact, the 'Daily Reckoning' often veers into personal territory, especially at the end:
"Last night's repast was organized by our friend, the reverend Peter Mullen, rector of St. Michael's Cornhill in The City. Peter is chaplain to the London Stock Exchange and an activist.
...
"We must do what we can to reverse what I call 'secular terrorism,'" he said. "You know, this didn't come from nowhere. A small group of intellectuals - notably Herbert Marcuse - got together. They said they needed to infiltrate our institutions and conduct a program of 'secular terrorism.' Marcuse used that expression. And that's what they did. Now, we have a situation where it is practically illegal, in Britain, for a teacher to tell his class that he is a Christian. And God help you if you dare to suggest that one religion is better than another. Even our own priests and ministers don't really believe in Christianity anymore. Many Church of England priests never even open the prayer book. They're victims of secular terrorism; they no longer believe their own faith. Instead, they believe all religions are equal…and all ideas are equally valid."
This is something I'd expect to read on a self-proclaimed Christian site. You could imagine he was Anglican or even an Evangelical for a moment. But then Bonner adds his own slant:
"We had a hard time concentrating. In front of us sat one of the most exquisite women we had ever seen. 'Yes, there is a God,' we said to ourselves. She had long red hair…and the kind of face you see on goddesses painted by Italian dreamers. She was probably in her 20's…so innocent and so lovely. And when she spoke, the tones came out like dessert.
"But what was she doing there? She was surrounded by middle-aged men, all of them grumping about the government, the intellectuals, the schools, art…finance…and all the other bad habits of our times…while recalling how much better things were 50 years ago. Her presence seemed so improbable, like a wedding cake in a machine shop. But it had a good effect on the old fellows. We sat up a little straighter and tucked in our shirts. Instead of yakking to one another with our typical boorish insouciance, we pulled in our stomachs and began making speeches. Now we had an audience…and a purpose.
"We are not the first to be in this position," began one Old Boy near us. "Since the days of Rome, we Christians have been a persecuted minority…not always…and not everywhere. But often. It's part of what makes us what we are. We have to be willing to accept martyrdom. That's what it's all about."
Aha! Gotcha, Bill! You're not just some cynical old nominal Catholic who glances balefully at the Church through bloodshot eyes while keeping a tight grip on the world, the wine, and your wallet. Neither are you a milk-and-water minister's man, with theology that goes only as deep as your boot soles.
No...this is a flesh-and-blood Catholic worldview that fully acknowledges original sin, man's faculties and frailties, and the beauties and pleasures of this life--while holding it all in an eternal perspective.
For a guy writing in secular finance, this is amazing.
Read the whole thing here.
Wednesday, November 28, 2007
Wednesday, November 14, 2007
Wacky Ways to Save Money Part 4: Dump Divin'
Today while washing dishes, I contemplated the fact that if all American families lived like we do, thousands of consumer-oriented industries would go under. There would be no "Cosmic Coffee" houses or "Pizza Planet" restaurants. Niche fashion boutiques would cease to exist, and nail salons would be unheard of. In fact (the mind boggles) even the vast secondhand market that I so depend on would soon dry up without the daily infusion of "old stuff" being moved out to make way for "new stuff."
If that sounds extreme, then check out this factoid: consumer spending accounts for more than 70% of GDP!!
That's right folks. Our economy depends on our secular spendthrift neighbors' continuous use of credit cards! If people just stopped spending money, except on bare necessities, our country would grind to a halt overnight. Mish keeps warning there's a severe consumer-led recession in the offing, but I don't think people realize just how bad it would be if we had one. The GDP figure above tells one side of the story. The facts on debt tell another. The third thing to consider is that more Americans rely on service industries for employment than ever before in our history. As spending slows, more and more consumer-oriented companies will announce lower earnings...their stock will plummet...they will scrap expansion plans and shed workers...which will lead to less spending as the pool of retail, food-related, and other service jobs dries up--and so on and so on.
The only thing to end a recessionary cascade like this is some prop consumers can cling to to shore up spending. In the '90's it was the "wealth effect" of rising stock and house prices, accompanied by credit card debt. After the recession of '01-02, the housing bubble created a refinance boom, and people pulled cash out of their houses, and piled on more credit card debt. Now with the stock market at a wobbly peak and housing in freefall, there is only one prop left--credit cards. With foreclosures and credit card defaults on the rise, it's clear the American consumer is tapped out. If he loses his job as well, the downward spiral has only one place left to go--bankruptcy. And as more and more people seek relief via bankruptcy, there is a bigger push to change the laws and so tie the consumer to his debt forever.
What happens to an economy when the recession is so long and so deep (and the debts are so staggering) that all the government spending in the world, along with the lowest interest rates in the world, don't do any good? Nobody really knows. Japan is still dragging itself out of a deflationary depression that has spanned 15 years and counting. But their people never stopped saving money. They had a trade surplus. Nobody knows what would happen if the US were to slide into a deflationary death spiral. The Daily Reckoning guys have made a stab at it in books like Financial Reckoning Day:Surviving the Soft Depression of the Twenty-First Century, The Demise of the Dollar, and Empire of Debt: The Rise of an Epic Financial Crisis. We find clues in bankrupted "Banana Republic" type countries or the dusty records of ancient Rome. But no country in history has ever carried so much debt for so long.
The sheer madness of it is staggering. If you want to see America digging its own economic grave, just take a drive to the dump. There you will see discarded hoards of consumer junk arriving by the truckload. Now, with my wacky title I am not suggesting you get out of your car and start digging through the dump. Nor will you need to squat on the edge of it, as impoverished people often do here in our own hemisphere (doubtless it's illegal). Neither do I advocate completely shutting yourself off from society and homesteading it (although some people have managed this, and I admire them for it).
I am suggesting three main survival strategies:
1: Stockpile necessities.
2. When shopping, see things for their utility and functionality.
3. Learn to hoard raw materials and supply some of your own needs through self-sufficiency.
As you can see, this will hardly require the cessation of all spending. In fact, if you like shopping, this strategy works best the more you shop. The trick is changing your mentality from a "spending" frame of mind to a "buying" frame of mind. If you are a housewife, you are likely the chief "buyer" for your household. The household needs certain supplies, tools, and raw materials. The household does NOT need Dish Network Satellite systems, extraneous gewgaws and gadgets, or a new set of decor for every season. One has to learn to see through all the marketing and advertising hype and ask oneself a series of questions:
"Do we need this?" "For what?" "For how long?" "Is there some other way to fill this need?" "If not, is the price of this thing reasonable?" "Will it last?" "How much space does it take up and are we willing to store it?" "What kind of maintenance will it require?" "How will we eventually dispose of it?" "Will it have been worth it?"
This mental flow chart will certainly slow spending--it might even slow your intestinal tract for a few days. However, it soon becomes second nature as the rate of accumulation drops and you begin to see the utility in things you already have.
What does it look like in practice? I shop a lot of clearance sales. In fact, my husband is used to hearing me say, "I'm going on a clearance crawl, honey," or disappearing in the middle of a large store because I spotted a fire sale somewhere. I shop secondhand stores. I scan recycling bins if I'm on a walk or a drive on trash day. And garage saling, I'm told, is an art in itself--one I hope to get more into as the kids get older. In our garage is a storage room with old particleboard shelving on which I store everything from canned goods to light bulbs to oddments of tools and hardware I've bought on clearance. Then when I need something, I don't have to make a special trip and pay top dollar...I can just go to my "store."
You can "trash-pick" on the Internet as well. My friend Rachel is a regular on Freecycle. She's always talking about something she posted there or got from there. Some people are incredibly skilled with sewing, or fabricating with raw material like wood or metal and can make lots of things out of scrap. Others are great with tools and can fix anything. I can't say we're like those people, but if you have a skill like that, it's money in your pocket whenever you can supply a need for yourself rather than being at the mercy of current pricing.
One more thing. Like compulsive eating, compulsive spending is a habit you can get into purely because it satisfies some part of you that is emotional in nature. The most intoxicating thing about acquiring new stuff is usually the first rush of newness--opening the packaging, taking out something that is perfectly clean and shows no wear, that works (or is supposed to work) perfectly, that distracts you from your worries and your to-do list for a few hours or days.
Remember that first real clothes shopping trip to the mall when you were a teen, with a friend in tow and a wad of discretionary cash in your hand? Trying on the clothes, pulling out the hangers, carrying those big bags around and pulling off the tags after you got home and performed a little fashion show for anybody who would notice? New stuff distracts us for a moment...we can forget about all the things we have that need cleaning or repair, all the unfinished projects or little niggling worries that have no solution at the moment. We can pretend that we are starting over...just for the moment...and that life will be better this time. Maybe if we just find the next great sale or the perfect bargain we can "make a killing" on something we wanted...something that replaces something else in the past that we didn't get. Or regret. In the end, consumer economics is more psychology than science. The clearer your head, the better you can play the game.
Let's not forget...and perhaps we should have taken this as our starting point, that we are completely naked and impoverished before God. No matter how much "stuff" we have, we'll never take it with us. I speak as somebody who really likes "stuff," and I definitely could cut back (even on my secondhand hauls). I have to constantly remind myself to adopt a spirit of poverty. Even if I could find something that I wanted at an acceptable price, that doesn't mean I should go and get it. I always ask myself, "Could I live without this?" Deep inside the answer always is, "Yes, you can."
UPDATE: After discussing this topic with my best friend (a history/social studies/economics teacher), she asked in frustration, "Why do people spend all this money on ridiculous stuff?" This topic begs the question, which I was then forced to think about. Why do people spend instead of save? There are several reasons:
1. If the Fed keeps interest rates artificially low (say, to stimulate the economy and "save" us from a recession, as they did in '01), then it lowers the cost of borrowing for banks, which then turn around and advertise lots of "great deals" on mortgage rates, home equity loans, credit cards, you name it.
2. At the same time it pushes down the rate of return savers earn on the money they keep in the bank. Aggressive advertising, "low low payments" and sales-of-the-century induce people to part with the cash--because they figure they're never going to see a deal this good again, and they might as well get it if they want it (hey, times are good, right?).
3. The price of the consumer's house keeps going up, which induces him or her to refinance and cash out their equity, or buy a bigger, newer house because mortgage debt appears as an asset, not a liability.
4. However, the same inflation that boosted house prices means that any money saved today will only be eaten away in the future. So why save? People just look at all the credit offers flooding the mailbox and start playing a shell game with their debt, figuring that the easy money will always be there, as long as they can afford the payments.
The result is the highest rate of consumer indebtedness in history. There is no money left to spend. The trouble is, when you borrow money you don't have, you're not borrowing some other money out there that used to belong to someone else. You are borrowing money from some bank who borrowed it from the Fed who created it out of nothing. Trick is, you have to pay it back with real money that you earn with your sweat and your blood.
If all the creditors came calling at once, the shell game would be up for good. This is the reason why so many banks are in trouble. They borrowed money (which did not exist) in order to make risky bets (which did not pay off) and now they are facing margin calls from investors who are expecting to be paid in real money (which there's not enough of). The length and depth and breadth of the "credit crunch" can only be measured in terms of how many banks can keep their "creditors" (the investors) at bay long enough to find the money to pay them enough to keep the game going.
Hint: there's not nearly enough.
But doesn't frugality hurt the economy? As I hope I've demonstrated, it only hurts in an economy that runs on debt. In a well-ordered economic system, there is enough incentive to save and for savers to invest their capital in good businesses, in expansion of production and technical progress--an environment in which competition thrives and prices are driven down through innovation in manufacturing and the delivery of goods and services. This is an economy in which no one need fear to save, to invest, or to spend--provided interest rates are set by free market forces which give accurate information about the value of money to the consumer and producer.
If that sounds extreme, then check out this factoid: consumer spending accounts for more than 70% of GDP!!
That's right folks. Our economy depends on our secular spendthrift neighbors' continuous use of credit cards! If people just stopped spending money, except on bare necessities, our country would grind to a halt overnight. Mish keeps warning there's a severe consumer-led recession in the offing, but I don't think people realize just how bad it would be if we had one. The GDP figure above tells one side of the story. The facts on debt tell another. The third thing to consider is that more Americans rely on service industries for employment than ever before in our history. As spending slows, more and more consumer-oriented companies will announce lower earnings...their stock will plummet...they will scrap expansion plans and shed workers...which will lead to less spending as the pool of retail, food-related, and other service jobs dries up--and so on and so on.
The only thing to end a recessionary cascade like this is some prop consumers can cling to to shore up spending. In the '90's it was the "wealth effect" of rising stock and house prices, accompanied by credit card debt. After the recession of '01-02, the housing bubble created a refinance boom, and people pulled cash out of their houses, and piled on more credit card debt. Now with the stock market at a wobbly peak and housing in freefall, there is only one prop left--credit cards. With foreclosures and credit card defaults on the rise, it's clear the American consumer is tapped out. If he loses his job as well, the downward spiral has only one place left to go--bankruptcy. And as more and more people seek relief via bankruptcy, there is a bigger push to change the laws and so tie the consumer to his debt forever.
What happens to an economy when the recession is so long and so deep (and the debts are so staggering) that all the government spending in the world, along with the lowest interest rates in the world, don't do any good? Nobody really knows. Japan is still dragging itself out of a deflationary depression that has spanned 15 years and counting. But their people never stopped saving money. They had a trade surplus. Nobody knows what would happen if the US were to slide into a deflationary death spiral. The Daily Reckoning guys have made a stab at it in books like Financial Reckoning Day:Surviving the Soft Depression of the Twenty-First Century, The Demise of the Dollar, and Empire of Debt: The Rise of an Epic Financial Crisis. We find clues in bankrupted "Banana Republic" type countries or the dusty records of ancient Rome. But no country in history has ever carried so much debt for so long.
The sheer madness of it is staggering. If you want to see America digging its own economic grave, just take a drive to the dump. There you will see discarded hoards of consumer junk arriving by the truckload. Now, with my wacky title I am not suggesting you get out of your car and start digging through the dump. Nor will you need to squat on the edge of it, as impoverished people often do here in our own hemisphere (doubtless it's illegal). Neither do I advocate completely shutting yourself off from society and homesteading it (although some people have managed this, and I admire them for it).
I am suggesting three main survival strategies:
1: Stockpile necessities.
2. When shopping, see things for their utility and functionality.
3. Learn to hoard raw materials and supply some of your own needs through self-sufficiency.
As you can see, this will hardly require the cessation of all spending. In fact, if you like shopping, this strategy works best the more you shop. The trick is changing your mentality from a "spending" frame of mind to a "buying" frame of mind. If you are a housewife, you are likely the chief "buyer" for your household. The household needs certain supplies, tools, and raw materials. The household does NOT need Dish Network Satellite systems, extraneous gewgaws and gadgets, or a new set of decor for every season. One has to learn to see through all the marketing and advertising hype and ask oneself a series of questions:
"Do we need this?" "For what?" "For how long?" "Is there some other way to fill this need?" "If not, is the price of this thing reasonable?" "Will it last?" "How much space does it take up and are we willing to store it?" "What kind of maintenance will it require?" "How will we eventually dispose of it?" "Will it have been worth it?"
This mental flow chart will certainly slow spending--it might even slow your intestinal tract for a few days. However, it soon becomes second nature as the rate of accumulation drops and you begin to see the utility in things you already have.
What does it look like in practice? I shop a lot of clearance sales. In fact, my husband is used to hearing me say, "I'm going on a clearance crawl, honey," or disappearing in the middle of a large store because I spotted a fire sale somewhere. I shop secondhand stores. I scan recycling bins if I'm on a walk or a drive on trash day. And garage saling, I'm told, is an art in itself--one I hope to get more into as the kids get older. In our garage is a storage room with old particleboard shelving on which I store everything from canned goods to light bulbs to oddments of tools and hardware I've bought on clearance. Then when I need something, I don't have to make a special trip and pay top dollar...I can just go to my "store."
You can "trash-pick" on the Internet as well. My friend Rachel is a regular on Freecycle. She's always talking about something she posted there or got from there. Some people are incredibly skilled with sewing, or fabricating with raw material like wood or metal and can make lots of things out of scrap. Others are great with tools and can fix anything. I can't say we're like those people, but if you have a skill like that, it's money in your pocket whenever you can supply a need for yourself rather than being at the mercy of current pricing.
One more thing. Like compulsive eating, compulsive spending is a habit you can get into purely because it satisfies some part of you that is emotional in nature. The most intoxicating thing about acquiring new stuff is usually the first rush of newness--opening the packaging, taking out something that is perfectly clean and shows no wear, that works (or is supposed to work) perfectly, that distracts you from your worries and your to-do list for a few hours or days.
Remember that first real clothes shopping trip to the mall when you were a teen, with a friend in tow and a wad of discretionary cash in your hand? Trying on the clothes, pulling out the hangers, carrying those big bags around and pulling off the tags after you got home and performed a little fashion show for anybody who would notice? New stuff distracts us for a moment...we can forget about all the things we have that need cleaning or repair, all the unfinished projects or little niggling worries that have no solution at the moment. We can pretend that we are starting over...just for the moment...and that life will be better this time. Maybe if we just find the next great sale or the perfect bargain we can "make a killing" on something we wanted...something that replaces something else in the past that we didn't get. Or regret. In the end, consumer economics is more psychology than science. The clearer your head, the better you can play the game.
Let's not forget...and perhaps we should have taken this as our starting point, that we are completely naked and impoverished before God. No matter how much "stuff" we have, we'll never take it with us. I speak as somebody who really likes "stuff," and I definitely could cut back (even on my secondhand hauls). I have to constantly remind myself to adopt a spirit of poverty. Even if I could find something that I wanted at an acceptable price, that doesn't mean I should go and get it. I always ask myself, "Could I live without this?" Deep inside the answer always is, "Yes, you can."
UPDATE: After discussing this topic with my best friend (a history/social studies/economics teacher), she asked in frustration, "Why do people spend all this money on ridiculous stuff?" This topic begs the question, which I was then forced to think about. Why do people spend instead of save? There are several reasons:
1. If the Fed keeps interest rates artificially low (say, to stimulate the economy and "save" us from a recession, as they did in '01), then it lowers the cost of borrowing for banks, which then turn around and advertise lots of "great deals" on mortgage rates, home equity loans, credit cards, you name it.
2. At the same time it pushes down the rate of return savers earn on the money they keep in the bank. Aggressive advertising, "low low payments" and sales-of-the-century induce people to part with the cash--because they figure they're never going to see a deal this good again, and they might as well get it if they want it (hey, times are good, right?).
3. The price of the consumer's house keeps going up, which induces him or her to refinance and cash out their equity, or buy a bigger, newer house because mortgage debt appears as an asset, not a liability.
4. However, the same inflation that boosted house prices means that any money saved today will only be eaten away in the future. So why save? People just look at all the credit offers flooding the mailbox and start playing a shell game with their debt, figuring that the easy money will always be there, as long as they can afford the payments.
The result is the highest rate of consumer indebtedness in history. There is no money left to spend. The trouble is, when you borrow money you don't have, you're not borrowing some other money out there that used to belong to someone else. You are borrowing money from some bank who borrowed it from the Fed who created it out of nothing. Trick is, you have to pay it back with real money that you earn with your sweat and your blood.
If all the creditors came calling at once, the shell game would be up for good. This is the reason why so many banks are in trouble. They borrowed money (which did not exist) in order to make risky bets (which did not pay off) and now they are facing margin calls from investors who are expecting to be paid in real money (which there's not enough of). The length and depth and breadth of the "credit crunch" can only be measured in terms of how many banks can keep their "creditors" (the investors) at bay long enough to find the money to pay them enough to keep the game going.
Hint: there's not nearly enough.
But doesn't frugality hurt the economy? As I hope I've demonstrated, it only hurts in an economy that runs on debt. In a well-ordered economic system, there is enough incentive to save and for savers to invest their capital in good businesses, in expansion of production and technical progress--an environment in which competition thrives and prices are driven down through innovation in manufacturing and the delivery of goods and services. This is an economy in which no one need fear to save, to invest, or to spend--provided interest rates are set by free market forces which give accurate information about the value of money to the consumer and producer.
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